Jobs Report: First Impression

April 4th, 2014 at 9:32 am

A broadly positive jobs report just out for March shows that payrolls were up by 192,000 and both the labor force and weekly hours worked grew as well. The jobless rate was unchanged at 6.7%, but the closely watched labor force participation rate popped up two-tenths to 63.2%, as about 500,000 entered the labor market. Taken together, that’s actually a good sign implying more people are being pulled into an expanding labor market.

With today’s report, private sector employment has finally regained its pre-recession peak. Private payrolls peaked in January 2008, bottomed out in February 2010, and have added 8.9 million jobs since then. That means it has taken more than six years (Jan08-Mar14) for private sector jobs to recover, an extremely stark reminder of the depth of the downturn and the weakness of what’s been a plodding labor market recovery. And remember, simply getting the level of jobs back to where it was does not account for the growth of the working age population over this period. This milestone, while welcome, only symbolizes repairing the damage.

Also, government employment is still over 500,000 jobs down since the recession began in late 2007 and thus total employment remains about 400,000 below its pre-recession level.

Turning back to the March data, payroll gains of the prior two months were both revised up, adding a total of just under 40,000 jobs to the counts for Jan and Feb. That means that the first quarter averaged payroll gains of 178,000 per month, slightly below the average for last year of 194,000.

The uptick in weekly hours also indicates both some strengthening in labor demand and, if it sticks, should confirm suspicions that recent declines in weekly hours were driven partly by the distortionary impact of unusually cold weather on these data.

Job growth was wide-spread across industries, though manufacturing disappointed, down 1,000 last month and up only 72,000 over the year. While the sector accounts for about 9% of total employment, it only accounts for less than 4% of the job growth over the past year. Strengthening the factory sector, particularly through focusing on improving net exports, should remain a key policy goal.

It’s particularly important to watch wage growth right now for a number of reasons. It’s been an unbalanced recovery, with most of the growth eluding working families. This dynamic, in turn, holds back broader consumer spending and serves as a constraint on the recovery. Third, the Federal Reserve is carefully watching the wage picture for signs of any incipient pressure from the job market.

Over the past year, both average hourly pay and weekly earnings have been growing at about 2% (in March, they both grew 2.1%). That’s ahead of inflation, which most recently has been quite tame, generally tracking below 2% on a yearly basis. That steady pace also provides no evidence of growing labor market pressures that would bleed into wage or price inflation.

In sum, the toplines from today’s report reveal a labor market that continues to improve at a steady, though by no means a gangbuster, pace. We’ve finally repaired the damage, at least regarding private sector payrolls. Most industries, with the possible and notable exception of manufacturing, are expanding, employers may be expanding the average workweek a bit, and wage growth is steady, not that fast, and not accelerating.

Though there’s certainly no trend there yet, the labor force grew last month, and if that keeps up, it will be an important sign that we’re finally pulling more job-market-sideliners back into the game.

But there’s still a lot of slack in the workplace and a long way to go until there’s enough pressure/worker-bargaining-power to ensure a more equitable distribution of the fruits of growth.

14 comments in reply to "Jobs Report: First Impression"

The growth in labor force participation rate and no drop in unemployment indicates to me that the idea that there is structural unemployment is wrong and instead as the economy improves more people will come back into the labor force. This means that the unemployment rate is a poor indicator of how bad the economy really is.

“…payrolls were up by 192,000…”, this figure seems to imply a meager 2% GDP growth rate. Atif Mian and Amir Sufi make the point: “Rising income and wealth inequality is not just about distributing the economic pie. It may very well have an effect on the size of the pie itself.”. A la mode, anyone? Fiscal stimulus? National Account balancing? How about a good old fashion bubble? The Great Recession is passing from the national consciousness and many distressed financial actors (read: labor) will suffer for this.http://houseofdebt.org/2014/04/03/larry-summers-and-wealth-inequality.html

What gets measured, gets done right? If we measure the “damage” in “number of jobs,” we’ve “repaired” it, but what if we measured it in real $’s of income, how does the damage look from that standpoint? How do these new “replacement jobs” really compare to the one’s we lost on a one-for-basis?

Exactly. The 0.25% interest rates are poisoning the jobs recovery. Why invest in capital goods and new factories that will pay be back in a decade? I’ll just borrow free money and pay it out as bonuses or dividends. Or use the cheap money to boost my share price by way of buybacks, or leveraged buy outs.

The Republicans were correct on this one that ending unemployment insurance extension (really welfare after the 26 weeks which are paid are up) would force the right people back into the job market and the unproductive out. This despite the left and its media painting a dramatic picture. Great news for Conservatives and bad news for the old Democrat liberals who seem intent on addicting people to “free money” for votes.

I must say however, that I am for minimum wage increases (money directly to the most needy workers without government inefficiently redistributing it) offset with elimination of income taxes on human capital further subsetted with taxes on consumption and equipment which will pay for a state-level single payer catastrophic insurance which would relieve businesses of paying for healthcare. This will reverse the current system of taxing and making human workers too expensive (disincentive to hiring) while actually giving tax shields (Incentive) to those who automate.

“The Republicans were correct on this one…”. You have presented no data, merely opinions, which are like… According to the BLS there are 10.5 million jobs seekers. This is probably a low end estimate due to BLS data gathering models). There were 4 million available jobs, not all of which are perfect complements and transportable. These inefficiencies lead to lead one to think the number of “fill-able” jobs is always below the number of “available” jobs. If the “right” people are replacing the “unproductive”, where is the increase in productivity? Hint: it has been falling steadily since 2003. http://data.bls.gov/timeseries/PRS85006092

“…income taxes on human capital…” are the last thing low income folks worry about. Consumption tax? Who do you think that might affect the most…um, the people who have to spend all of their income to survive?

But if I look at Employment-to-Population Ratio for ages 25-54 it’s still down significantly from peak – http://data.bls.gov/timeseries/LNS12300060. Yes, it’s up from the bottom ca 2010-2012 but it’s still down quite a bit from where it was ca Jan. 2007.

It is not just ratios, meaning the numbers are worse than you thinkhttps://research.stlouisfed.org/fred2/data/PAYEMS.txt
137,928,000 total jobs March 1, 2014
138,365,000 total jobs January 1, 2008
Six years later, still missing 437,000 jobs just to equal pre-recession.
Then you need an additional 4,150,000 jobs for recovery.
2008 sported a 5% unemployment rate.

You may ask if we’re at 6.5% unemployment why are we 4.5 million jobs short when
6.5% – 5% – 1.5% and 1.5% x 138 million jobs = 2 million jobs.

One assumes it’s from people dropping out of the job market, lowering the unemployment rate. Add almost another 2% unemployment to get the 4.5 million jobs back and you see we’re closer to 8.5% unemployment today. Since other estimates of true unemployment are generally higher, this analysis provides a well grounded basis for a more accurate number. Higher estimates consider anyone discouraged from looking for work due to poor economic conditions a good candidate for reentering in conditions improve. This is not the case.

Growth in working age population is immigration plus births less deaths (about a million net plus each in normal times, but running 3/4 that now). The number reaching 64 is about equal to number reaching 15, as population growth of 50 years means baby boom numbers are now born every year. This doesn’t mean there won’t be a greater proportion of people over 65 as boomers retire, just means absolute numbers of working population will not decrease as a result.